Uncertainty, sure. Turmoil, probably. But this economist says Brexit might not be a disaster
Britain will not awaken to a post-apocalyptic nightmare on 24 June if it votes to leave the European Union, a top economist has told Morning Wire
Dismissing the notion that Brexit would be a "disaster" for the UK economy, Jean-Michel Six, chief economist for Europe, the Middle East and Africa at Standard & Poor's (S&P), also said that Britain may be able to ride out any currency crisis which might accompany a vote to leave in just a matter of weeks.
“It is very difficult to distinguish between the short-term impact of a vote to leave … and what happens beyond that,” Six said.
“Financial markets can sometimes react extremely violently for a few days. It is not out of the question that you could have … a very significant drop [in the value of sterling]. But, let’s not forget that on the other side we have a very strong central bank here that is fully committed to defending the currency. So I think the run on the pound could very well be a short-lived event,” he added.
Read more: Economists imagine the day after Brexit
Mark Carney, governor of the Bank of England, has already started to flex his muscles ahead of the referendum, irking campaigners, including Conservative MP Jacob Rees-Mogg, that believe the central bank should keep shtum.
This week, the Bank's Financial Policy Committee showed no sign of letting-up, warning that “the risks around the referendum continue to be the most significant near-term domestic risks to financial stability”.
Threadneedle Street has also been amassing its own 'Brexit warchest' over the past year, boosting its holdings of foreign currency reserves from $79.3bn (£54.9bn) to $99.7bn.
For their part, markets seem to be taking no chances on what Brexit might mean for the value of pound with many selling-up and flocking to safer havens. Since the start of the year, sterling has lost 5.4 per cent against a basket of currencies and is closing in on its worst quarter since the depths of the financial crisis in 2009.
James McGrory, spokesman for Britain Stronger in Europe, said, "already, we’ve seen the pound taking a hammering. If Britain goes out on its own and that situation gets worse, it’s going to be scant comfort to British people that the markets might recover eventually".
Other economists have warned that it would lead to more wild swings in the value of sterling, and S&P did predict that Brexit would result in lower growth over the short-term. Goldman Sachs estimates the pound could lose 20 per cent, taking it to down to $1.20 and near-parity with the euro.